The Pricing Trilogy

Tim Rich on Flickr

Photo credit: Tim Rich on Flickr

So apparently, I’m wrong.

At least, that’s what Nathan Barry is saying in his latest post about eBook pricing:

Sacha and Jarrod, thank you so much for sharing your story and your numbers. But I think both of you are wrong when it comes to pricing.

It’s true it’s hard to argue with his results. After all, his eBooks made an order of magnitude more revenue than mine.

But let’s back up a little. When I wrote a guest post about eBook pricing over at the A Smart Bear blog about one year ago, I never imagined it would spawn such a debate and trigger two follow-up posts by two different eBook authors.

The first rebuttal to my post was penned by Bootstrapping Design author Jarrod Drysdale, who coincidentally released his eBook on the same day as my own Step by Step UI Design, and blogged about it on A Smart Bear as well.

So it’s only natural that Nathan would come back to the same place to conclude the trilogy. Still, I feel like being called out gives me a right to explain myself.

Why Nathan’s Wrong

Nathan’s post (as did Jarrod’s before) ignores something that seems obvious once you state it: maximizing revenue is not the only possible goal.

My eBook might have brought in less in revenue, but it also reached a lot more people. Having a 1500-email list of people interested in what I was doing was instrumental in kick-starting my weekly newsletter, which now has more than 4000 subscribers.

(As an aside, since I don’t really have a product to sell, that newsletter has turned into a kind of more personal blog/support group where I can share both my successes and my failures. You should sign up to get access to the archives.)

The second factor is that this eBook was fairly short (because I wanted to make sure people actually read it). Now sure, you’re supposed to price on value and not by “weight”, but I still didn’t feel confident charging too much for something you could read in 20 minutes.

So I might’ve missed the mark by a few dollars, but to this day I still don’t believe that charging $39 for that eBook would’ve been appropriate.

Why Nathan’s Right

Now on the other hand for my new book, I followed Nathan’s model (almost) to a T.

In an admirable display of cross-marketing and thinking ahead, I followed up my book about design with a book about… coding.

So yes: I took a good look at my 4000 email subscribers who signed up to hear me talk about design, and then said to myself “You know what would be great? Writing a book for a completely different audience!”.

Still, I don’t regret it. The result, Discover Meteor (which I co-wrote with Tom Coleman), is not only the best book I ever wrote (not very impressive, I know), but also –I believe– the best book about Meteor out there (still not that impressive), and according to some, it’s also “some of the best writing on programming in general”.

If you head over to the landing page now, you’ll see that we both priced relatively high (at least compared to other programming books) and implemented multiple packages.

(By the way, the reason we priced high is because we think the book is worth it. Actually it’s more than a book: you also get access to multiple code commits per chapters, live instances of the app you’re building, plus support from both authors if you run into any stumbling blocks.)

I was also planning on doing “the flip” (presenting the higher-priced packages first in the page) but since our Premium Edition package isn’t quite done yet we kept a more traditional order (on Nathan’s own advice, by the way. Thanks Nathan!).

I’m not prepared to share hard figures just yet, but I can say that the launch was very successful. Although I must concede that Nathan still has us beat by a sizable margin on the first 48-hours total sales. Then again, Meteor is still a fairly niche topic (although I’m pretty sure this will change!), so it was to be expected.

Too Expensive?

I said earlier that we priced “high”. “High” and “low” are relative terms. Saying that a mountain is “high” only has meaning compared to other mountains on Earth (for example, Mars’ Olympus Mons dwarfs our own puny Everest by more than 12km).

So when I use the word “high”, all it means is that our programming eBook costs more than other programming eBooks.

But wait, that’s unfair! Why should one book cost more than another? Clearly all books have the exact same content, offer the same value, and should be priced at the exact same price point.

I’m kidding, but you get the point. We’re perfectly fine with a Ferrari costing more than a Subaru: we just assume the Ferrari is better in some way, and if we can’t afford it we just move on.

But digital goods such as eBooks differ from Ferraris in one important way: they don’t have any associated cost of production (more on this later), which completely warps our little human brains.

Here is a Hacker News comment about Nathan’s new book by an otherwise smart individual (at least twice as smart as me, if HN karma points are any indication):

Oh, for $29 I only get a PDF … but I wanted a book. For that much money I really expected at least a paperback, possibly a hardcover.

There is no basis here for expecting a paperback, or possibly a hardcover (would it have to be leather-bound, too?). The mind just wants to associate that $29 cost with something real, something tangible to justify parting with your hard-earned money without feeling regret.

But I shouldn’t be snarky. If my studies of the human mind (i.e. reading Malcolm Gladwell books and watching TED talks) have taught me one thing, is that being smart is no help against biases and fallacies, and that nobody is immune from them (including me, of course).

Is It Right?

We’re finally approaching the crux of the matter. We know you can price high, make loads of money, and retire young to a tropical island. But is it the right thing to do?

In other terms, is it ethical to, as another HN commenter put it, “try to wring every last penny out of your customer with inflated prices just so you can brag about it on guest blog posts“? (ouch)

This is another display of the “Price is Right” fallacy (yeah, I just made that up): the idea that a good has an inherent “right” price and that anything above that is over-charging and unfair.

That idea is already debatable for physical goods (want to guess how much your expensive Nike shoes actually cost to make? Or worse, your iPhone?). But for digital goods, it’s even harder to pin down a price!

After all digital goods don’t cost anything to produce. So if the “right” price was based on production costs, all eBooks, movies, and music would be free! (also know as the Pirate Bay Theory of Economics).

But maybe the “right” price is based on recouping your initial investment. Well, both me and my co-author spent about 3 months working full-time on the book. Assuming a salary of $4000/month, that’s a $24k cost. But then, how do you distribute that cost over multiple sales? After all you won’t know how much you’ve sold until you’re done selling…

At the end of the day, unlike food and water, eBooks about JavaScript frameworks or selling products online are not a necessity of life.

So I don’t believe there’s any ethical issues with charging $100, $200, or even $10000 for a digital product: if people don’t want it, they don’t have to buy it.

It’s true it feels unfair and overprice, but that’s just our dumb instincts speaking. We’ve evolved to be deeply sensitive to injustice (even monkeys feel that way), and that instinct kicks in whenever we think we’re being taken advantage of.

A Truly Fair Pricing Model

I just said that pricing high is fair, but just like some infinite sets are demonstrably larger than other infinite sets, some types of fairness are fairer than other types (if that makes sense).

For example, it’s hard to argue that the pay-what-you-want model favored by Humble Bundle or the Lost Type Co-op is as fair as it gets.

But it’s not the only model. Heroku uses a usage-based payment that tries and match up your costs with your consumption perfectly. That’s certainly fairer than one-size-fits-all pricing plans. For a book, that might translate into letting people pay by the chapter.

And you could go even crazier: for example, you could set a total goal at, say, $100k, and start refunding a small amount to all previous customers for each additional sale past that goal.

Product > Pricing

At the end of the day though, what truly matters is that people be happy with their purchase, and your pricing model is only a small part of that equation. Much more important is the actual product.

And judging from the reviews our book has been receiving, I’m happy to say we’ve succeeded at least on that level!

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